News, ideas and a software CEO's thoughts from 25 years in the industry.

EDI: Growing and Beneficial

Our firm’s recent implementation of a complex EDI system for a large Tier One automotive supplier sparked the idea for a few comments about the subject of electronic data interchange.

EDI has been around for many years, since the 80’s at least. It’s a mature and fast way of transmitting data, like purchase orders, shipping notices and invoices between trading partners. While prevalent in major industries like automotive, it’s a technology that’s deployed at a wide variety of firms. Its use in smaller firms is usually driven by demand from higher end trading partners (think Walmart) and others who demand a formalized structure for exchanging standard, common data or ‘forms’ between firms.

While some thought EDI might have faded by today, given the emergence of technologies like XML, the fact is, it’s here, its use is actually growing, and it’s here to stay for a good while. There are some self-evident reasons for this:

EDI is mature. It’s cheap and it works. It ubiquitous, in that it’s been an e-commerce standard for a decade or more. It’s not industry-specific – it has application across multiple industries and geographies. And it’s network independent, running across value added networks and dial-up protocols and today’s internet standards.

Moreover, EDI has some clear benefits to its users:

It lowers overall transaction costs – considerably. It’s incredibly fast, and once it’s working, it just keeps working – meaning, you can process a lot more orders (purchase or sales, as just two examples). You can integrate it with your MRP to determine future requirements (shameless plug: Just ask us!). It reduces lead times and can help reduce inventory levels when used as an aid in forecasting (see previous point). It eliminates paper and document re-keying. It upgrades the quality of your relationship with your trading partners. And more often than not, it gives you a competitive edge.

Today EDI is found across the business spectrum from retail to automotive, and across the globe. And it’s being fine-tuned today for the internet, where those who use it can do more, with less.

We’ve talked in more depth about the fundamentals of EDI here and here in the past. You owe it to yourself to check into it. It’s just one more arrow in the quiver of your improved productivity.